How to present Sch L on 1065 when a sale leads to the termination

[K_CPA]

A owns 60% of a partnership & B owns 40%. On 12/31/23 A bought B's 40% through a sale of interest and now owns 100%. The business will now continue on 1/1/24 as an LLC owned entirely by A.

My understanding has always been that in a case where all the partners agree to permanently shut a partnership down, you report all 0's in the "End of Tax Year" section of Schedule L. However in a case like this where the business will be continuing, am I correct in assuming you would report the "End of Tax Year" section of Schedule L as you would in any other year, showing balances in all of the accounts?

[Rapid Robert]

I hate to see a question go unanswered, but this seems like an obscure one. I see it was also asked in another forum, also without much response.

My only observation, helpful or not, is that Schedule L is the balance sheet per books. I think the accounting shown on a company's books is not tightly constrained by any tax laws, so I don't see why you can't show it consistent with the company's bookkeeping methods. Of course, then you still need to deal with M-1 and M-2 entries.

[Maribeth]

It appears to me that the partnership ended as of 12/31/23 and the new sole-proprietorship began as of 1/1/2024. So at the end of 2023, the partnership ceased to exist, and the assets were distributed to the remaining partner. Your balance sheet should reflect zeros. Then on 1/1/24, your new entity begins, with assets contributed by A and that becomes your beginning entry for your new books.

[K_CPA]

Rapid Robert & Maribeth; thanks for your input!